Monetary policy rules in Central and Eastern European Countries: Does the exchange rate matter?

We estimate monetary policy rules for six Central and Eastern European Countries (CEEC) during the period when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by splitting up the exchange rate impact into two different components we significantly improve estimation results for monetary policy rules in CEEC. We uncover that the focus of the interest rate setting behaviour in the Czech Republic, Hungary and Poland explicitly switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. Finally, Slovenia and, after a policy switch, Romania exhibit a solid relation with inflation as well.